France embarrassed by Renault spying debacle

France faced severe political embarrassment on Friday after carmaker Renault said the three top executives it sacked for industrial espionage in January might not be spies after all.

Finance Minister Christine Lagarde said the country's second-biggest autos group must face all the consequences now that it thinks it might have been tricked.

The scandal has shaken the company to its core, and at one point threatened to trigger a diplomatic spat with China.

Chief Operating Officer Patrick Pelata said he would accept the consequences of the debacle once the inquiry was complete, as he admitted in a newspaper interview there were reasons to doubt Renault had suffered industrial espionage.

A source close to Renault said Pelata would probably have to leave, protecting Chief Executive Carlos Ghosn who is also head of partner Nissan Motor <7201.T>.

It's likely to be Patrick Pelata who forms the shield to protect the CEO, the source said on Friday. In this story, somebody has to throw themselves on the grenade.

In January the carmaker lodged a legal complaint over suspicions of spying targeting its high-profile electric vehicle program, amid fears that information had been passed to a foreign power.

The three sacked executives denied wrongdoing and are already taking legal action against their former employer, which when grouped with its partner Nissan ranks as the world's third biggest carmaker.

What counts today is getting to the truth and getting there quickly and if the suspicions were unfounded that justice be done, confidence restored and compensation paid, Lagarde said in an interview on RMC radio.

The case has strained relations between the French government and Renault, as the 15 percent state-owned carmaker came under fire for not informing authorities of its suspicions soon enough and carrying out its own investigation first.

The affair also threatened a diplomatic spat when news of the sackings broke in January, after a government source said investigators were following up a possible link with China in initial probes before a formal inquiry was launched.

One shouldn't shoot without a sight or accuse without proof, Lagarde told RMC.

Industry Minister Eric Besson issued a statement on Friday distancing himself from any blame in the affair. Besson had said on January 6 in connection with the probe that the expression 'economic warfare', sometimes extreme, is appropriate.

Friday's statement said Besson had never spoken about the accusations made against the employees, whether about the theory of espionage or manipulation.

There was consternation in the company too.

Employees were already very surprised when they learned the names of the people involved, said the source close to Renault. Now they are having trouble understanding why there is such a U-turn, and why all the information that was given was not checked.

Renault's lawyer, Jean Reinhart, had said on Thursday that the French intelligence service was still investigating the existence of bank accounts in Switzerland and Liechtenstein as part of the inquiry. The possible accounts have featured as a key part of the case against the three fired executives.

But Pelata, who revealed his doubts in an interview in Le Figaro's Friday edition, told the newspaper the company had now arrived at two hypotheses.

Either we are confronted with a case of espionage and a senior security executive is protecting his source despite everything, he said.

Or Renault is the victim of a manipulation, which we don't know the nature of but which could be a fraud.

Pelata said he would propose reinstating the three executives and making good any injustice if all the doubts are lifted.

When the inquiry is finished we will accept all the consequences up to the highest level of the company, that is to say up to myself, Pelata said. He made no mention of Chief Executive Carlos Ghosn. (Additional reporting by Patrick Vignal; Writing by James Regan and Daniel Flynn; Writing by Andrew Callus; Editing by Hans Peters and Greg Mahlich)